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Senior Loan Officers Survey

9 November 2016 by Mark Holman

We have previously commented that the central banks’ surveys to their banking systems give us a really good guide to where we are in the cycle, as well as providing a great deal of colour on loan demand, supply and pricing. The US 3rd quarter survey, known as the Senior Loan Officers Survey was released on Monday, and was eagerly anticipated by us here at TwentyFour as prior surveys had indicated a degree of tightening of loan standards. Our take has been that the tightening so far has been moderate and not a material concern.

Monday’s survey goes further to underscore this view. Overall there was a modest element of tightening, either by volume or by standard or by price, but the degree of tightening in Q3 was negligible and less than the prior quarters.

As far as the all-important consumer sector was concerned, lending standards were more or less unchanged, with the exception of auto loans where standards tightened once again slightly. The demand side of the equation from the consumer remains robust.

Given that there were no Fed funds rate changes in Q3, the results focus entirely on credit appetite and there is little in the survey to alarm us from a fixed income credit risk standpoint or cyclical standpoint.

In Q4 however we will most likely see another rate hike, but it comes so late in the quarter that the survey period may not capture enough data to be meaningful, so the next most interesting data point for the US is the April 2017 survey where we can see how that rate hike (if it materialises) has been absorbed into the economy.

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